With Tylenol recall 2010, a corporate icon stumbles

In a moment of startling corporate clarity, Johnson & Johnson recalled all its Tylenol from US store shelves in 1982 after capsules tampered with in Chicago were linked to six fatalities.

The move cost the company $100 million and threatened to decimate its leading share of the market. Instead, consumers applauded the company's openness and sales rebounded within a year. Three decades later, the move is still regarded as a shining example of corporate social responsibility.

The time it took the company's CEO to make that gutsy call? Six days.

On Friday, a unit of Johnson & Johnson expanded a recall of Tylenol products to other over-the-counter medicines, including Benadryl, Motrin, and Rolaids, because of reports of nausea and other symptoms. The time from those initial reports to Friday's action? Twenty months – and only after the Food and Drug Administration (FDA) had finished an investigation that found multiple problems at the Johnson & Johnson factory.

It's sad to see a corporate icon stumble, especially when the problems are of its own making. The move is a reminder of how fragile corporate reputations are.

Users of Johnson & Johnson's over-the-counter drugs can click here to see which products are being recalled. They can also call the company for help at 888-222-6036 (including weekends).

Less lethal, more embarrassing

To be fair, Johnson & Johnson's current problems are far less severe than in 1982. The effects of the tainted drugs have been uncomfortable but not lethal. There's no killer this time running around injecting Tylenol tablets with cyanide.

What's embarrassing about the latest recall is that it took so long for the company's business unit, McNeil Consumer Healthcare, to detect the problem and act.

"While McNeil has cooperated with FDA in recent weeks, there initial response was unsatisfactory," says Christopher Kelly, an FDA press officer. "We repeatedly pressed them."

For example: In 2008, starting in May, the company received 76 consumer complaints about a musty odor emanating from some of its Tylenol products, according to a detailed FDA investigator's report (.pdf) filed last week. But the company didn't test for the problem until September of that year and only tested the drugs and the packaging, not the factory environment, the inspector reported.

Other waves of complaints cropped up the following April, June, and August, according to the report, but the company didn't issue an alert until September, didn't investigate other batches of Tylenol, and didn't initiate a recall until November.

Probable cause: wooden pallets

By mid-December, two company investigations had concluded that the most probable cause of the problem was chemically treated wood from pallets and empty bottles coming from the bottle manufacturer, the FDA report said. McNeil expanded its recall on Dec. 18 to include all lots of a Tylenol arthritis product with a red easy-open cap.

But again, the company failed to assess other medicines using packaging material from the same supplier, according to the FDA report, despite more than 10 complaints of mustiness for its Rolaids product and more than 39 similar complaints for another Tylenol product.

Separately, the company investigated a 2008 electrical failure during the manufacture of its Motrin product, concluding that the extended downtime did not have an effect, according to the FDA report. But the federal investigator noted that the company's study did not consider the actual conditions, including "electrical failures, temperature and sensor problems, computer and instrument problems that may affect the process critical parameters."

That highly critical report was filed Jan. 8. On Jan. 15, McNeil expanded the recall to include those products. "A small number of the product lots being recalled were associated with the complaints of an unusual moldy, musty, or mildew-like odor," the company said in a statement released Friday. "McNeil Consumer Healthcare has now applied broader criteria to identify and remove all product lots that it believes may have the potential to be affected, even if they have not been the subject of consumer complaints."

McNeil says its investigation is continuing and it is taking additional steps to combat the problem, including ceasing the shipment of all its products that used materials shipped on the suspect pallets, says Marc Boston, a spokesman for McNeil. The company is also requiring all its suppliers to stop using pallets treated with the particular chemical. He declined to comment on whether McNeil was still using the original supplier or had shut down the problem plant.

"We will be working with the FDA to respond to the letter and the correspondence," he adds.

Recession pressures?

Who knows what pressures the company was under? Drug companies, like most of the rest of corporate America, have been under intense pressure during the "great recession." They've had to trim costs. Puerto Rican drug facilities have been hit hard with layoffs.

Still, no matter what the economic environment, the best time to face up to your problems is immediately. It's a lesson that Johnson & Johnson taught corporate America nearly 30 years ago. Maybe it has to relearn it again.